Bookkeeping: Should you Outsource?

After providing some of the basics of bookkeeping, the next question you should ask yourself is whether this is a process you should do yourself or if you'd be better served by outsourcing this task to us.

Reasons to Keep Accounting Tasks In-House:

1. You have the time, ability, and desire to do it yourself.  Even though this isn't the norm, some business owners are very good and efficient at doing their own accounting.  In fact, I've teased some of our clients that if they are ever looking to become an accountant, we'd be glad to hire them!  If operating your business isn't taking up all of your time, you might want to consider doing this yourself.  If you are a detailed person who can keep clean records, you may not need any help.  If the idea of doing this stuff after hours doesn't scare you, give it a try.
2. You can't afford to hire outside help.  There is nothing wrong with not being able to afford this service at the current time.  Your cash flow may not be able to support the additional fees at this time.

Reasons to Hire Us:

1. Your time would be better spent focusing on the operations of your business.  After a period of growth, you might not have the time to do these tasks any more.
2. Your business isn't large enough to be able to afford a full-time bookkeeper, but too large to do it yourself.  Hiring a person as a W-2 employee is an expensive commitment.  It is hard to find good help for reasonable wages.  If you outsource your bookkeeping to us, you'll be investing in a professional relationship that will help free up your time for growth opportunities at a reasonable fee that will be much cheaper than hiring a full-time employee.  Don't forget about the payroll, unemployment, and other taxes that you'd be saving as well.
3. You need someone with more accounting expertise to serve as a trusted advisor.  Let's face it, you probably can't afford to hire someone with high level accounting skills and experience at an affordable wage.  With outsourcing, you are able to only pay for the work performed instead of paying someone to browse their Facebook profile all day.  You pay for the help you need, not a warm body in a chair for 40 hours a week.

If you are interested in finding out more about our services, please contact us to see if we can help.  If you'd just like some accounting training, we'd be glad to provide that as well.  Please let us know how we can serve your needs.  Thanks for reading! 

Bookkeeping: A Primer

There's a good chance you started your business for some glorious reason.  A chance to work for yourself.  The ability to make more money.  You wanted to change the world.  I can guarantee you that not a single person in the world started their own business to do their own accounting!

So, since it is a necessary evil, I thought I would provide some tips for those of you trying to wear every hat necessary to keep the business running.

1. Keep your personal and business money separate. You're probably thinking to yourself, "Everyone knows that!"  But you'd be surprised the number of small businesses who don't follow this basic advice.  If you haven't already, get yourself a separate business checking account and make sure to not co-mingle personal expenses with business expenses.  Many folks end up missing out on legitimate business expense deductions because they get to the end of the year and their records don't reflect everything they've spent for the business.
2. Income - expenses = profit.  All the income you receive for selling your product or providing your service less what you spend as ordinary and necessary expenses for running the business equal your profit (or loss if this is a negative number).  Bookkeeping in it's simplest form is just keeping track of the financial transactions from your business.  
3. Keep it simple.  If you are just starting out or don't have much of an accounting background, come up with a system that will help you keep track of your income and expenses.  If this is a simple excel file, great.  If you are up to learning Quickbooks, Xero, Microsoft Money, Peachtree, or any other accounting software, that is great.  But don't make things too complicated.  Have your CPA help you set up a simple system that allows you to keep good records and keep them up to date.
4. Don't procrastinate.  One thing we see over and over again is people who have good intentions of keeping everything in house who just seem to get behind and never get caught back up.  You need to decide if you have the skills, ability, and desire to do this yourself.  If so, then make sure you don't get too far behind.  Remember that not keeping good track of the financial health of your business can end up in missed tax deductions, bank overdraft fees, and an in ability to meet cash flow needs.

Remember that bookkeeping in its most simple form is keeping track of the financial transactions in your business.  Don't make it harder on yourself than you need to.  If you are considering starting a business, look into our start up consulting services so you can get started on the right foot.  It can mean the difference in success or failure of your new venture!

Is Insurance Tax Deductible?

A common question we receive is "what insurance can I deduct on my tax return?"

For Individuals

If you are an individual employed at another company, most of the insurance you pay for is not tax deductible.  Life insurance is never tax deductible.  Health insurance, if provided by your employer, is paid with pre-tax money which is a benefit for you.  If you are paying with after tax money, you're in the worst of all scenarios.

Insurance for your car and belongings is also not tax deductible if not used for a business purpose.  If you have a home office used for business purposes, a portion of your home expenses can be deducted if you itemize on Sch A of your tax return.

For Self-Employed Individuals

If you work for yourself and are not considered a corporation or partnership, you may deduct your health insurance as an adjustment to income on page 1 of the tax return.  You must have reported net income from your operations, though, on Sch C, E, or F.

You can also deduct worker's comp, business insurance, and health insurance paid on behalf of your employees.

For Owner's of S-Corporations

The rules are mostly the same as outlined above for SE folks, but the difference being that health insurance paid on your behalf must be reported as wages on your W-2, and then deducted on your personal 1040.  Again, you must have income from your operations to deduct the health insurance payments.

Keys to Remember

• Life insurance is usually never deductible.
• Any insurance expense paid for that is ordinary and necessary for your business operations is deductible.
• Health insurance is deductible for your employees and for yourself if you have income from the operations from the business.  If you are taxed as an S-Corp, you must report those health benefits on your W-2 if you are a larger than 2% shareholder.

If you aren't convinced your CPA is helping you sort through and plan for insurance expenses, please contact us to see how we can help you!

Steps to Take When You Receive an IRS Letter

You've successfully filed your tax return.  Thank goodness you won't have to think about those pesky taxes again until next year!  You're busy living your life and then one day you get a piece of mail that looks concerning.  Uh oh...  You received something from the IRS.  You slowly open it to see if the police are coming to lock you up (j/k... sort of).  Instead, you find that the IRS has randomly decided that you owe them some extra money / you didn't fill out a form correctly / you failed to file a tax return so they filed one for you or whichever of the other hundreds of reasons why they may contact you.

Here's what you should do once you've received correspondence from the IRS:

1. Don't panic -  Often the IRS sends correspondence that is just an administrative error on your part or their part.  Before you go stressing yourself out too much, contact your CPA to see the best way to respond.
2. Contact your tax professional - Hopefully you've built a relationship with your accountant that allows for year round correspondence.  Also, hopefully your tax preparer isn't just open during tax season.  If your tax professional isn't around, feel free to contact us and we'll try to help you sort through the mess.
3. Decide what action needs to be taken - After you've met with your tax professional, they should help you sort through and decide if you owe money or if you just need to send a letter documenting why the IRS is incorrect.
4. Respond in a timely manner - Usually the IRS correspondence letters will have a date that you need to respond by.  Make sure to figure out the game plan in plenty of time so you meet their deadlines.

Even though it's never fun to receive a letter from the IRS, don't get too worked up until you figure out if the problem is legitimate or if the IRS is wrong (more often than not it is some sort of matching error that is easy to clear up).  Please contact us if you need help with responding to the IRS. We'd be glad to help! 

Year End Equipment Purchases: Smart or Stupid?

You know the drill...  You've had a successful year in business.  You give your accountant a call around this time of year to see what your potential tax bill might be and if he has any suggestions to help you reduce the upcoming payment to uncle Sam.  The conversation usually goes something like this:

"Well Joe business owner, if you don't make any more changes or have any big shifts in income this last month of 2013, you will probably owe $10,000 come next March or April.  Now, if you were to go out and buy a new truck/machine/etc before year end, we can write off the entire purchase price and you won't owe anything."

Maybe your facts and circumstances are different, but I've met with many business owners who are in the perpetual cycle of year end purchases and trade-ins to avoid income taxes.

When Does It Make Sense To Make Year End Purchases?

1. When the purchase will help you make more money.  If you are replacing something that is in fine working order or if you are purchasing something your company doesn't really need, it never makes sense to pay $1.00 to save 40 cents on taxes.  Many small business owners get stuck in this trap.  Instead of the purchase serving to create more income or improve processes, it becomes a means to avoid paying taxes.  Don't let the tax tail steer the overall business goals and objectives or your business.
2. When the deduction comes in the form of future benefits.  Are you aware of all the tax savings available with different retirement options for self-employed people?  Wouldn't it be nice to save the money for a later day and still receive a tax deduction on this year's taxes?  I'll be discussing retirement vehicles available in future posts, but ask your accountant about these options as well.
3. When you have the cash to pay for it.  So many business owners get stuck in the financing trap.  Is it always wrong to finance purchases?  Of course not!  But many small business owners disguise the poor cash flow of the business by financing everything.  So you decide to finance that new piece of machinery and take the 179 deduction up front.  Guess what?  Now when the payments start coming due in the future months and years, you aren't getting any write off because you used it all in the year of purchase!  Nothing like using up all your cash flow to then not receive a deduction for those payments.  There are exceptions,  but I believe it is usually a good idea to match the tax deduction with the cash outflow from purchase.

In summary, make sure that your year end purchases make good overall business sense (don't just focus on the taxes).  If your current accountant isn't helping with some of these planning decisions, please give us call or contact us to let us know how we can help with the overall planning of your enterprise.

5 Reasons Why Springfield, MO is Awesome

Whenever I'm traveling around this great country, I'm reminded of how fortunate we are to live in good ole' Springfield, MO.  I thought I'd give you 5 reasons why I love living and working in the Springfield area.

1. Outdoor Activities - Whether you love to hang out on the lake, float down a river, or enjoy the myriad of parks and walking trails available, the Springfield area is tough to beat.  When I have time, I enjoy fishing the local lakes, rivers, and ponds. 
2. Cost of Living - No need to make six figures to afford a decent quality of life in this area.  We enjoy affordable home prices, property taxes, and utility rates making it easier to enjoy a middle class existence on an average income.  You can also move to one of the great surrounding communities and enjoy your own little slice of heaven on a few acres for very reasonable prices.  
3. Friendly People - The Springfield area and surrounding towns are filled with people who will offer a smile and a warm greeting.  People aren't too busy, too hurried, too (fill in the blank) to be kind to their neighbors.  That isn't something you always find in other parts of the country.
4. Numerous Small Businesses - In many larger metro areas, most folks work for large corporations.  There is nothing wrong with that, but I appreciate that our community is made up of many successful small businesses.  Provides more character in my opinion....
5.  Restaurants - Seems like Springfield has more good restaurants than cities of comparable size.  Whether you're looking for a cheap dive, an upscale restaurant, or a national chain, Springfield has a little bit of everything.  Some of our favorites include Flame, Iguana Roja, and Big Easy Grill.

What are your top five reasons for enjoying life in the Springfield, MO area?

Unique Selling Propositions

As we move into 2014 and beyond, it is more important that ever for your Springfield based small business to stand out from the crowd.  With Google search engines ever present at our fingertips, it is simple and easy for a potential customer to find out everything about your product or service.  Not only can a potential client find out about you, but you are now competing with businesses around the globe if a local presence isn't necessary to deliver what you're selling.

In an increasingly difficult business environment, it is more important than ever for your business to stand out from the crowd.  Enter the Unique Selling Proposition (USP).  What is a USP?  Simply put, a USP is what makes your product or service different from every other competitor out there.

Let's look at our accounting business as an example.  We prepare tax returns accurately.  We provide traditional accounting and bookkeeping services that allow our clients to focus on what they do best.  We help small businesses navigate the ever changing regulatory environments.  We consult with start up businesses to help them get off on the right foot.  That list looks like every other accounting service offerings you've ever seen, right?  So how do we (and how can you) go about differentiating our services?  There are a few options available:

Niche Focus

One way we go about differentiating ourselves from the slew of other accountants is by focusing on specific business types and professions.  We're not to the point where we only serve one industry, but we focus on serving service businesses and professionals.  Not only do people search out experts in their niche, but as a professional it is easier to become a master of a few skills rather than a jack-of-all-trades.

If you are a landscaper, maybe you focus your niche on high end commercial design and build projects.  Instead of offering mowing, irrigation, and maintenance, you've set out to be the best design and build landscape contractor in the Springfield, MO area.  

Maybe you are a plumber and instead of proving every service under the sun, you focus on emergency issues for local commercial businesses.

The point isn't to turn work away.  The point is to become the go to expert in one area of your field.

Service Delivery

Another way you can differentiate your product or service is by how you deliver to the client.  Maybe you will be known for your professional attire and attention to detail at your customer's house.  Maybe you will offer a response time within 24 hours.  The point is to find something unique to your offering and make that a differentiation point from your competitors.

In our business, we try to do this in a few ways.  Instead of just speaking with you at tax time, we try to create a year-round relationship to be available for your financial and accounting questions as they arise.  

Another area of differentiation is that we do not charge by the hour.  All of our fees are known up front and many clients are on a fixed monthly pricing agreement.

We utilize technology to serve our customers needs.  We're always evaluating the latest in cloud technology to help our clients save time and increase production.  Instead of always looking in the rear view mirror, we try to help our clients plan for the future.

There are a myriad of ways to differentiate your service or product offerings.  The examples from our accounting firm was to get you thinking about ways that you can stick out from the vanilla crowd (i.e. your competition).  

How have you had success creating a unique selling proposition?  What makes your product or service different from your competition?